GKENT - Patiently waiting

source: http://www.malaysiastock.biz

Top line and bottom line of GKENT have been growing consistently, what's more surprising is that net profit doubled as compared to FY 16. I have mentioned in my last article Brief Analysis on Market Outlook & Construction Stocks (GGGE that i was keep buying and indeed i did it so right

the price had been stagnant for 3 months since dec 2016, the quarter result was released on 20 march and the closing of that day was 3.23

the price broke the strong resistance of 3.15 the next day, and keep breaking new high everyday, the closing price on 7 april was 4.22, gain of at least 23% if one bought it before quarter result

is Gkent fully valued at current price?

Gkent is very attractive if u look at ROE, profit margin, cash on hand

but one may think PE of 15.63 is quite expensive

however, investing isnt about looking at the past, i am expecting at least 50% growth in terms of EPS because FY18 will be including the revenue from LRT 3

am i being over optimistic? the EPS FY 17 increased 103% as compared to FY16, the management prove that they can nail it over the years

extracted from AR 2016

The engineering division contributed 79% of the top-line to the tune of RM471 million and is the main growth driver for FYE2017. The metering division also saw higher revenue amounting to RM128 million which makes up 21% of the topline for FYE2017 (extracted from qtr report).

Orderbook is vital to a a construction company, and with FY17 job wins at RM1.1bn, GKent’s orderbook stands at RM6.2bn. This translates to a superior cover ratio of 10.4x on FY17 construction revenue, one of the highest in construction sector

with the RM6.2bn orderbook on hand,

let's assume 6.2bn to be completed within 5 years=1.24b revenue per year

which is more than double of revenue of FY17 598,965 without taking water metering division which constitutes 19% revenue for the FY17 into account

so i am considered quite conservative in anticipating the EPS to grow 50% yoy

Eyeing to grow orderbook further

GKent is keen to participate in the system works for rail projects such as the East Coast Rail Link, Southern Double Track and High Speed Rail. Apart from that, it has also tendered for a water treatment plant job (RM200m) where it is going against 2 other contenders.

Source: Hong Leong Investment Bank Research

Extra info

Gkent is planning a 2-to-3 share split and investors love this kind of corporate exercise which can make the stock ''cheaper'' and affordable, and possibly driving the price up further

Technical outlook

Gkent is very bullish, trending updward since the released of quarter result, immediate resistance at 4.42, the stochastic and RSI indicators shown Gkent is overbought, for those interested, can try to catch around 4 on weakness

my 1st batch has earned  177% gain, after averaging up all the way before quarter result and it even triggered the max weightage set(20%) of my portfolio, here is my latest average price & gain

it's worth to wait

Disclaimer: it isn't a buying recommendation, your money, your decision

Brief Analysis on Market Outlook & Construction Stocks (GGGE)

At 1st, let' take a look on KLCI index

Sign of strong upward trending, immediate resistance at 1730 (hopefully can break above it)
Interest hike? it seems not affecting our market at all this time, why i said so?

http://www.businessinsider.my/fed-interest-rate-hike-march-probability-100-percent-2017-3/?r=US&IR=T#srMm0QOzxG8PF3DI.97

Foreign funds were dumping Malaysia Stocks like there is like no tomorrow at the time FED raised interest last year. In contrast, they have been buying non-stop for 3 consecutive days though they anticipating FED will be raising interest rate next week, dont u smell something?
If KLCI index can break above 1730 with high volume in next 2 weeks, i will then sailang all my available cash into equities market.

In stock investment, stock selection is important, but what equally important is sector to be focused, a stock will only 'rise and shine' if and only if overall industry is doing good, for 2017, im still anticipating construction stocks could outperform others because value of construction jobs highlighted in Budget 2017 totalled RM99bil.

for full article, pls refer:http://www.thestar.com.my/business/business-news/2016/10/25/construction-stocks-rally-following-budget-2017/

Constructions Index

immediate resistance at 313, the index is now sloping upward and supported by 20 days EMA
do note that the 20 days EMA cross above 70 SMA in Jan (Golden Cross),  which means superbullish

Gkent (my favorite construction stock)

my 2nd stock that went above 100%

Gkent is trending sideways since Dec 2016, im not worrying about it, in fact im buying it and averaging up since Feb. Why? As the project delivery partner (PDP)  for LRT3, Gkent will be including the very 1st revenue from LRT 3 in coming quarter result.
How much is the revenue?
9 billions revenue is shared by Gkent and MRCB and to be completed in 5 years
estimated will bring in 900m revenue, which translates 225m for each quarter, impressive huh?

Gamuda

Known for being a reputable and reliable operator in multi-billion ringgit infrastructure projects, Gamuda’s name is usually the first to crop up when it comes to high-profile government projects.
Gamuda Bhd is set to have a busy 2017 as it outlines two major projects with staggering figures, namely the RM28bil MRT2 project and four townships with an estimated gross development value of RM45bil. http://www.thestar.com.my/business/business-news/2016/12/13/busy-2017-for-gamuda/

Gamuda have finally broken above its strong resistance, the sky is the limit now?? It depends whether the foreign funds manage to push it or not as EPF is dumping it recently, for risk taker, i can suggest to consider Gamuda-WE as the premium is only 6.8%

Upcoming project that might benefit Gamuda:
ERL worths 55 billion
HSRl worths 40 billion
Penang Transport Master Plan worths 27 billion
MRT3 projects which are all underground, will be announced in 2017

Gadang

Gadang is definitely one the the most undervalued construction stocks, currently trading at P/E of 8
the price hardly move though it announced a spectacular quarter result on 25 Jan
Gadang surge up 6.2% on 3 march as it is rumoured to be awarded one of the packages of MRT2 project, im not suggesting to buy Gadang-WB as premium of 38% is unacceptable to me

Ekovest

For more info, pls refer my prev post
Ekovest is surprising me as it keep breaking new high after special dividend and share split

2nd quarter result is came in above expectations as net profit surging 7.8x yoy to RM41m, driven by a strong construction division.

my 3rd stock that break 100% gain mark, more to go

New catalyst
Ekovest has drawn up plans to list its property and infrastructure units on Bursa Malaysia

http://www.nst.com.my/news/2017/02/208902/ekovest-targets-listing-2-more-divisions-bursa


In a nutshell, construction sector looks promising to me in 2017, the aforesaid 4 stocks make up more than 50% of my new investment portfolio, and i will probably keep these stocks till year end unless there is major changes announced.


Disclaimer: it isn't a buying recommendation, your money, your decision